Vertical Aerospace to go public at $2.2 billion valuation with up to 1,000 aircraft pre-orders

Avatar for Elan HeadBy Elan Head | June 10, 2021

Estimated reading time 7 minutes, 55 seconds.

Vertical Aerospace has announced plans to go public through a merger with blank-check company Broadstone Acquisition Corp. (NYSE: BSN) in a deal that give the U.K.-based eVTOL developer a pro forma equity value of $2.2 billion.

Vertical Aerospace VA-X4 eVTOL
Vertical Aerospace says its five-seat VA-X4 eVTOL air taxi will carry passengers at speeds of over 200 mph (320 km/h). Vertical Aerospace Image

The transaction is expected to close in the second half of 2021, after which Vertical will trade on the New York Stock Exchange under the ticker EVTL. Contributors to the associated $89 million private investment in public equity (PIPE) include American Airlines, the aircraft leasing company Avolon, and aerospace suppliers Honeywell and Rolls-Royce, which are strategic partners in the business; and Microsoft’s M12. Rocket Internet and 40 North were named as key financial investors.

Additionally, Vertical Aerospace announced commercial partnerships and individual pre-orders with American Airlines, Virgin Atlantic, and Avolon for up to 1,000 of Vertical’s VA-X4 eVTOL air taxis, creating “multiple near-term and actionable routes to market,” according to Vertical Aerospace founder and CEO Stephen Fitzpatrick.

Subject to achieving certain conditions and milestones, American has agreed to order up to 250 aircraft with an option to order an additional 100; Avolon has agreed to pre-order up to 310 aircraft with an option for a further 190; and Virgin Atlantic has an option to purchase between 50 and 150 aircraft. Collectively, the pre-orders and options are valued at up to $4 billion.

Vertical expects to work with American Airlines on passenger operations and infrastructure development in the U.S., while in the U.K., it will work with Virgin Atlantic to explore the joint venture launch of a Virgin Atlantic-branded short haul eVTOL network, including operations and infrastructure development.

“Today’s announcement brings together some of the largest and most respected technology and aeronautical businesses in the world and together we can achieve our aim of making the VA-X4 the first zero-carbon aircraft that most people will fly on,” stated Fitzpatrick. Vertical aims to certify its electric air taxi with the European Union Aviation Safety Agency (EASA) and launch commercial operations by 2024 — the same ambitious timeline as several other first-wave eVTOL developers.

Vertical Aerospace joins competitors Archer, Joby, and Lilium in announcing plans to go public by combining with a special purpose acquisition company (SPAC). Embraer spinoff Eve Urban Air Mobility is also in talks to combine with the SPAC Zanite Acquisition Corp.

However, while the Archer, Joby, and Lilium deals are expected to generate $1.1 billion, $1.6 billion, and $830 million in gross proceeds, respectively, Vertical’s merger with Broadstone will result in gross proceeds of just $394 million. Some industry observers project it could take $1 billion or more to certify a novel eVTOL aircraft.

Virgin Atlantic VA-X4 eVTOL
Virgin Atlantic says a joint venture with Vertical Aerospace would bring short-haul electric vehicle connectivity to its U.K. airport hubs, starting with London Heathrow as well as Manchester and London Gatwick. Vertical Aerospace Image

In an investor call on June 10, Vertical Aerospace chief financial officer Vinny Casey acknowledged that the company is planning a “very modest” upfront capital spend.

“Phase 1 of our spend is to build and certify the VA-X4 and that will require gross spend of around $300 million, of which we already have around $50 million of funding through cash and grants. Phase 2 of our spend is to build a state-of-the-art assembly facility and the total gross of this we estimate at around $140 million,” Casey said.

“We would expect some netting off against this number for in-year profits and pre-delivery payments. So we are very comfortable that our raise of $394 million gross equips us well to reach commercialization, especially when you take into account that we have the largest announced forward orderbook globally.”

According to Fitzpatrick, Vertical’s “lean, asset-light business model” is enabled by its partner ecosystem, which includes not only Honeywell and Rolls-Royce but also GKN, which is developing the VA-X4’s electrical wiring interconnection systems, and Solvay, which is supplying advanced composites and adhesives. Batteries are the only major aircraft system that Vertical Aerospace is developing in-house, sourcing lithium-ion cylindrical battery cells but owning all of the battery system design, integration, and smart charging technology.

Fitzpatrick claims that this business model will allow Vertical Aerospace to build and operate its aircraft at an estimated cost of just $1 per passenger-mile — far below the projections of its competitors. Joby, for example, expects to launch at a cost of $3 per passenger-mile, and Archer at $3.30 per passenger-mile. Vertical projects it will be able to achieve profitability and cash flow breakeven with annual sales of less than 100 aircraft. By 2026, it is targeting annual production of 1,000 aircraft, which would translate to revenues of $3.6 billion.

In the June 10 investor call, Broadstone chairman Hugh Osmond boasted that his team — whose other investments include Pizza Express, Punch Group, Phoenix Group, and Keepmoat Homes — has generated large returns “by focusing on specific industries in which we see transformative opportunities.”

“The next sector ripe for disruption, in our view, is transportation,” Osmond said. “We believe that eVTOL technology will change the way that people travel . . . We see it as a disruptive technology that matches the advent of the car or the aeroplane.”

This article has been updated with additional details from a June 10 investor call.

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